A divide has opened up between investors who want clear sustainability reporting standards and energy companies that prefer voluntary disclosure. A dump truck works near an oil sands extraction facility near Fort McMurray, Alta. on June 1, 2014.JASON FRANSON/The Canadian Press
Some of Canada’s largest institutional investors support quick adoption of a slate of new sustainability reporting standards while energy and mining companies want disclosure to remain voluntary and exclude items such as indirect carbon emissions.
The Canadian Sustainability Standards Board is poring over 169 responses to its call for input into plans to adopt international rules for sustainability and climate-related reporting. The feedback shows a stark divide between investors such as pension funds and asset managers demanding detailed comparable data and companies that say some factors are still too uncertain and implementation too burdensome.
ATCO Ltd., ACO-X-T the Calgary-based utility and industrial conglomerate, said it opposes mandatory reporting of Scope 3 emissions, those that occur from entities in its supply chain and from end use of its products, saying there is a “lack of maturity” in estimation methods. The company joins many others saying that doing so would put it at a competitive disadvantage to those in the U.S. after the Security and Exchange Commission decided against making Scope 3 reporting mandatory.
The CSSB suggested in its draft delaying the implementation of Scope 3 reporting by two reporting periods after the standards are in force. Some large investors said they are wary of that, arguing it would put Canada behind other jurisdictions adopting the global guidelines developed by the International Sustainability Standards Board.
Canada Pension Plan Investment Board, the country’s largest institutional investor, said it is open to the idea of a transition period, and the prospect of “safe-harbour” disclaimers for companies.
“However, we strongly encourage issuers to not unduly delay the measurement and reporting of Scope 3 emissions, as we view it as important to understand indirect climate change risk across the entire value chain and not just those directly impacting the business,” CPPIB said in its response.
To date, countries accounting for more than 55 per cent of global gross domestic product (GDP) have signed onto the initiative to establish an international baseline for sustainability reporting. The CSSB was formed to tailor the global standards to a Canadian economy heavy in resource-extraction and small- and medium-size companies.
Markets are driving momentum for international sustainability reporting, says standards board chair
It released its draft standards in March, and invited public comment. The Canadian Securities Administrators, the umbrella group for provincial securities commissions, has said it will examine the CSSB’s work before deciding on moving to mandatory sustainability reporting.
“The board is in analysis and decision-making mode now, and the aim is to make final decisions this fall,” Lisa French, vice-president of sustainability standards for Financial Reporting and Assurance Standards Canada, the umbrella organization for standard setting, said in an e-mail. “Final decisions are closely followed by the issuance of final standards.”
Ms. French declined to comment on the responses or whether the CSSB’s final standards will differ materially from the draft versions, saying it will make its work public through summaries of meetings and how it came to its conclusions later.
Besides public companies, it also received feedback from industry associations, accounting consultancies, environmental groups and individuals. The board said it also had discussions with more than 700 organizations in 70 meetings and events.
British Columbia Investment Management Corp., the province’s public-sector pension plan, said it too is open to the idea of giving companies time to adopt Scope 3 reporting. But it emphasized the importance of giving investors the data to determine transition risks.
“It can also help companies prioritize emission reduction strategies, encourage product innovation, and identify leaders and laggards in their value chain,” BCI said.
Another contrast concerns conducting scenario analysis – gauging impact of climate risk over a range of potential possibilities. Enbridge Inc., the pipeline and utility company, said it wants scenario analysis removed from the standard.
The practice, like Scope 3 measurement, suffers from “a lack of standardized assumptions, methodologies and timeframes” for such things as predicting future financial resources to deal with climate-related effects and other uncertain data, Enbridge said.
Several companies pushed back against a proposal to report material climate- and sustainability-related data in conjunction with annual financial statements, with some arguing it would add to an already-heavy reporting burden at year-end. A handful of respondents also highlighted potential risks exposing companies to penalties under recently passed amendments to the federal Competition Act meant to protect investors and consumers against greenwashing.
Barrick Gold Corp. ABX-T said it compiles much of the data for its sustainability report in the first half of the year for publication in June, and that the most up-to-date details would not align with year-end disclosure.
“Forcing these disclosures to be made concurrently risks compromising the quality of the sustainability disclosures and requiring disclosure in an integrated fashion risks burdening users of financial statements with information they do not deem material and/or relevant to their decision making,” Barrick said.
Among investors, Addenda Capital, the Montreal-based sustainable investing firm, said Canadian standards should align closely with international ones to allow “broad comparability.” Addenda said phase-in periods are kept to one year, rather than two, with January, 2025, as the first reporting date. It also called for sustainability reports to be on the same schedule as financials, as spelled out in the international standard.